Ubisoft recently had an earnings call in which they talked about quite a few aspects of their business and the business of gaming as a whole. It was interesting to learn things like how even two years into this new console lifecycle, 360/PS3 Ubisoft games are still outselling their One/PS4 counterparts. Or how the Wii U makes up exactly 3% of Ubisoft’s software sales (up 2% from last year!).
But the point I found the most interesting was when CEO Yves Guillemot discussed the reason digital prices remain so high, especially compared to their often-discounted physical counterparts. The reasons, it turns out, are terrible.
“Digital is more reactive than what we put in stores, but at the same time, it doesn't react as fast on consoles than it does on PC," Guillemot said. "What we can say is that when games are older than one year, digital is a lot more dynamic on console because there are less units in stores. It's a new business, a new trend, and we think all this will get more in line with time, but for sure, at the moment you see all sorts of prices depending on who is doing a promotion for that specific week.”
CFO Alain Martinez chimed in as well.
"On digital we will not sell [a game] for a lower price compared to physical. After a few weeks or few months things can change, and as Yves has been saying, sometime you might have a promotion on Amazon [that is] not on GameStop, but we can also react on the digital side.”
And back to Guillemot:
"Also, one thing to consider is related to stocks; if we have stock in stores, we tend to make sure we decrease the quantity of units in stores before going digital with lower prices."
This all may sound like muddled business babble, but the translation of it roughly equates to this.
A company will always want to sell a game for full price whenever they can. But the problem is that physical retail copies take up literal shelf space. In order to move product, literally move it, off store shelves, places like Gamestop or warehouses like Amazon will have to sell physical games at a discount at some point. That's an accepted part of retail.
Digital obviously does not have that problem. There is no inventory to clear out, so Ubisoft is free to have the price be high for longer. In this case they are Amazon or Gamestop, as they’re selling you the game directly with only a tiny middleman in the form of Xbox Live or PSN (or Steam, but that's a more competitive atmosphere so you see more discounts more often). With no actual inventory and an eternal desire to sell for full price, here we are.
It’s also the case that digital copies can’t simply sell for say, $50 instead of $60, even though with the amount of cost saved through a lack of physical production, packaging, distribution and an intermediate store, it could easily be priced there. If digital games start being sold for cheaper than their physical counterparts when they’re new, that upsets retail partners greatly and they may refuse to carry certain games that do this, and so on.
The long and short of it is that even in this age where bookstores and blockbusters are dying, we’re still a slave to physical stores whether they be GameStop or Walmart. Because of the archaic system of games sales they have in place, digital prices will remain high to not upset the retail applecart while simultaneously making more money for the publisher at max price, because no one is willing to go out on a limb and price a digital game lower outside of periodic sales. It’s a frustrating loop the industry can’t break out of.
If anything, the constant argument is that games should actually be more expensive, as despite inflation, prices have remained relatively constant for a decade. But start talking about $70 USD games and the firestorm will make all other gaming controversies look trivial in comparison.
It’s kind of nice to see Ubisoft telling it like it is, even if how it is remains awful. At some point, physical media will disappear, but gaming will probably be one of the very last holdouts at this pace.
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